The functional mode of telephone operation differs from the stimulus mode in the way meaning is attributed to events. For example, a given telephone has a button labeled "Transfer." When this button is pressed, one of two things can happen: the phone can send a message to the switch stating that the Transfer button was pressed, or it can send a message stating that "button number 18" was pressed. In the functional model, the button's function is indicated. It allows more flexibility in the phone hardware, because the switch doesn't need to know anything about the layout of the buttons, but the telephone will likely be more expensive, because it has more intelligence.
The stimulus model means that the event is simply indicated in a more raw, hardware fashion, such as by button number—even down to separate button-up and button-down events. In a stimulus-based system, telephones can cost less, but more intelligence is required in the switch so that it can recognize different types of telephones and translate their buttons into features. The stimulus model can provide more flexibility because different people can configure their phone buttons to mean different things through switch programming rather than by changing the phone itself.